We've all seen the commercials with the beloved (somewhat older) celebrities touting the new "Reverse Mortgage" for the older homeowner.
Seems like a great idea, but what are they REALLY getting into?
What a reverse mortgage boils down to, essentially, is tapping your equity. Homeowners (62 and older) can qualify for these if their homes are owned in full or nearly paid off. The homeowner can choose how they are paid with this reverse mortgage; monthly, as an open line of credit, or in one big payment. The homeowner retains title, just as they would with an equity loan.
Some Cautions and facts;
During the actual term of the reverse mortgage, you don't have to do repayment. HOWEVER, there is interest charged, and it has to be paid in one lump sum at the end of the reverse mortgage.
As long as the owners reside in the property and keep up insurance, taxes, and repairs, the reverse mortgage doesn't need payback. If they sell the house, die or move from the house for more than one year, the loan end of that reverse mortgage kicks in, and it will need to be paid back (again though, WITH INTEREST)
The reverse mortgage is not fun money or living expense money. It's ideal for the homeowner that plans to STAY in the home, forgoing assisted living or nursing care.